Tesla CEO Elon Musk says his company isn't worried about quarterly profitability. The Starkish playboy, who also founded SpaceX, recently rode away with millions in cash after selling part of his stock in Tesla's IPO. (Source: Michael Graham Richard)

Tesla hopes to return to profitability in 2012 when it rolls out its new Model S EV. (Source: Autoblog)

Company says it doesn't care about quarterly profitability

Tesla
is sort of like hip-hop superstar of the auto world -- it's blowing
through money like it could be dead tomorrow.

The
company had plenty of promising news so far this year. In May
it announced that Toyota
invested in it and contracting it to help produce Toyota's
upcoming electric RAV4 crossover SUV. The company also
secured $226M
USD in cash from a initial public offering of
stock.

However, according to its latest earnings report it
bled out $103M USD in only its first 3 quarters to date. Its
latest loss -- for Q3 2010 -- was at $34.9M USD. That's
disappointing considering that in Q3 2009 the company only lost only
$4.6M USD, and was
profitable for the first two quarters of 2009.

Company
founder and chief executive Elon Musk received the news of the big
loss casually, commenting to
the San
Jose Mercury News,
"Attaining quarterly profitability isn’t a goal… We’re
very focused on long-term profitability."

Mr. Musk who
pocketed a tidy sum of cash during the stock offering, says that with
Toyota's support, too, the losses are less of a concern, writing in
the earnings
report:

We
are very pleased to report steady top-line growth and significant
growth in gross margin, driven by the continued improvement in
Roadster orders and our growing powertrain business. Roadster orders
in this quarter hit a new high since the third quarter of 2008,
having increased over 15% from last quarter. While some of this is
due to seasonal effects associated with selling a convertible during
the summer months, we are pleased with the global expansion of the
Roadster business and the continued validation of Tesla’s
technology leadership position evidenced by our new and expanding
strategic relationships.

So
if Roadster orders are increasing, why is Tesla losing so much
money? The answer lies in its entry-level luxury electric
vehicle, the
Model S, which it wants to roll out. Tesla hopes to sell
the car for around $40K USD, after tax credit. However, cutting
its production costs in half is no easy chore -- particularly when
Tesla hopes to complete the vehicle in just over one more year,
beginning assembly in early 2012.

Tesla also has the advantage
of strong support from the Obama administration and the U.S.
government. President Obama recently urged
Republicans in Congress to back EV funding.

Those
factors have led investors to be generally optimistic, and share
prices currently are at above $24/share, over a 40 percent gain over
the IPO price of $17/share.

The critical test for Tesla,
though, will come in 2012 -- the same year that the Roadster will
cease production. If it can't deliver sufficient quantities of
the 2013 Tesla Model S, or if it faces delays that could spell
disaster for the newly public automaker. And even if it
can produce the
vehicle, it faces the further test of whether the relative "masses"
of entry luxury buyers really desire an electric vehicle from a
relatively green automaker. Tesla and Mr. Musk believe (or at
least say they believe) that the Model S will sell very well -- and
they better hope so, as the company's success depends on it.

Comments

Threshold

Username

Password

remember me

This article is over a month old, voting and posting comments is disabled

My point could be that it's not necessarily a bad thing for governments to offer incentives for certain things. What matters is who benefits from government programs. If you want to complain about stuff, then complain about US agribusiness subsidies that drive out foreign farmers from their own country's market which leads to all sorts of problems. Complain about the absurd amount of US military spending.

I don't believe that the government's plan to develop electric cars is such a bad thing provided that the electricity is produced in a better way than we produce oil. Compare the effect of that plan to the other ways taxpayer money is being spent. Of course, just like any assistance program, there will be those that try to milk the system. But that can happen with and without government involvement.

I grew up in a small farming community and can say that Ag subsidies can be good and bad. I have seen family farms saved by them in bad years, but I have also seen some who take advantage of the system.

As for military spending, again there is good and bad. There are allot of good things that have trickled down from military projects that benefit us, but there are many large corporations that also milk the system. Frankly even those corporations employ people who help the economy, so there is some good there.

I wasn't just referring to the economic impact as being bad, I was trying to point out the effect of those two things you mentioned. One being the destruction of foreign farmer's lives and the impact on their society and another being the many deaths caused by the US military and/or its weapons and training.

In these two cases, I think it's safe to say the bad far outweighs the good.

quote: My point could be that it's not necessarily a bad thing for governments to offer incentives for certain things.

Ummm handing a company a pile of taxpayer money for a product that maybe, MAYBE, 1% of the country would be interested in isn't an "incentive". Especially in the middle of a terrible recession. And I fail to see how an overpriced electric roadster can be classified as a national benefit and something the Federal Government needs to be interested in.

Correct me if I'm wrong, but isn't the government assistance program for the development of cars that can use alternative fuel sources? You're making it seem like Tesla are the only ones getting assistance. One of the benefits, as I'm sure you know, is lower reliance on oil and the terrible foreign policies that result from that dependence.

I'm not sure I understand your comment about Liberals. Most of the public should be against the huge military budget regardless of their political beliefs. Anyway, how can you want lower taxes while accepting the massive amounts of money being spent on the military?